The Nexus between Financial Development and Economic Growth: An Application of the VECM Model and Machine Learning Algorithms

High economic growth is one of the most important goals for any developing country. Even though a wide range of factors influence economic growth, this article focuses on financial innovation, trade openness, and government spending. This study’s main goal is to investigate the relationship between Bangladesh’s financial development, trade openness, and government expenditure on the growth of the economy. The long-run link was confirmed by the Johansen Co-integration test, which confirmed that the study’s variables are cointegrated. In both the short and long runs, the VECM model was used to figure out what’s going on with the variables. All the study variables have significant short- and long-term economic implications, according to the findings of the VECM model. In the last section, we used machine-learning methods to forecast economic growth. In a machine learning method, the K Neighbors Regression classifier outperforms other classifiers in predicting economic status.